NAB’s wealth moves under review

National Australia Bank
is likely to call a halt to its acquisitive push into wealth management should its $4.6 billion bid for
Axa Asia Pacific
Holdings be successful, following strong resistance from investors concerned the bank is paying too much for too many assets.

Chief financial officer
Mark Joiner
said further acquisitions in wealth management would be likely to be off the agenda should NAB succeed in taking Axa APH. The deal would be the biggest wealth management acquisition ever done in Australia and comes shortly after NAB bought Aviva’s local life insurance business as well as the up-market retail brokerage JBWere.

The Axa APH deal would give NAB an unrivalled lead in retail investment platforms.

But it has faced strong opposition from some institutional shareholders who fear NAB has too many acquisitions to integrate.

“We never say never. But the emphasis would be on turning what we’ve done into a success," Mr Joiner told The Australian Financial Review. “We would be quite happy to dig in."

In addition to Axa APH, NAB is also in the midst of bidding for 318 bank branches in the UK to be sold by Royal Bank of Scotland.

While refusing to confirm NAB had bid for the assets, Mr Joiner said the RBS sale was expected to be wrapped up by July, although the timing remained in the hands of RBS.

A July deadline would mean the outcome of any RBS deal would be known around the same time that Axa APH shareholders are likely to vote on NAB’s bid should it be cleared this week by the Australian Competition and Consumer Commission.

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“One of the negative differentials between us and the other banks is this tail of M&A activity," Mr Joiner said. “It’s quite big and quite uncertain. But over the next six months the thing you can say about it, win, lose, buy, sell, whatever, is that the uncertainty will go away.

“We’ll know where the ACCC stands [by April 22]. And then you would have to go to a shareholder vote and by July you’ll be done. In the UK, we’ll either have bought something, sold something or committed to the status quo by, hopefully, about the same time."

Mr Joiner’s comments provide the first indication that NAB is looking to set a time-frame on when it needs to publicly clarify its UK plans. Last year, the bank made just £78 million in profit in the UK against £42.7 billion in assets. In return on assets terms, one Australian dollar earns 5.3 times as much profit in Australia as it does in the UK and NAB is under pressure to find an exit strategy.

The ACCC has promised to reveal its position on both NAB and rival bidder AMP’s bids for Axa APH by April 22. But the AFR understands an announcement is likely to be made a day or two earlier with key people involved in the decision, including chairman Graeme Samuel and mergers commission Jill Walker due to fly to Istanbul on Friday for a conference.

The ACCC has publicly said an acquisition by NAB raises more concerns about a reduction in competition than an acquisition by AMP.

While the ACCC’s public statement of issues released in February contains eight distinct areas of concern, advisers closely involved in seeking ACCC clearance believe the main hurdle for NAB centres on just one issue – its dominance of master trust and wrap platforms. These are software programs used by financial advisers to invest clients’ money and have been described by the commission as a “central link in the chain" between retail investors and investment products as well as a “gate-keeper" for the entire wealth management sector.

Both NAB and Axa APH have their own platforms. AMP effectively rents its platforms from Westpac Banking Corp and Macquarie Group. Leaving aside rented platforms, a merged NAB-Axa APH would hold twice the amount of funds under management on its retail investment platforms to that of its ­closest competitor, potentially allow it ­to dictate pricing for financial ­planners.

Under the reign of chief executive
Cameron Clyne
, NAB has become the most acquisitive of all the banks. Since he took the bank’s helm in early 2009, NAB has spent $830 million on buying Aviva’s Australian life insurance and wealth management business, $99 million for an 80 per cent stake in JBWere and $385 million on Challenger Financial Services Group’s mortgage business.

It is understood the bank has also bid for RBS’s bank branches and could potentially be a bidder for more branches to be sold by Northern Rock and Lloyds. All three UK banks have been ordered to divest assets in return for receiving state aid during the financial crisis.

But Mr Joiner cast doubt that either the Northern Rock or the Lloyds sale would get underway soon.

“Lloyds is moving very slow, I think they’re hoping it will go away. And we don’t even know who’s going to be in government or even if there will be a government. So I don’t think you can count on any of the other things."